South Korean Traders Accused of $3.2B Crypto Exploitation
Traders reportedly took advantage of the Kimchi premium, a difference in pricing between South Korean and international markets.
Authorities have cleared South Korean cryptocurrency dealers of charges related to arbitrage between international and domestic exchanges during the first trial. Allegedly, their goal was to take advantage of the Kimchi premium, a pricing difference between international and domestic South Korean markets.
The prosecution said that a profit of almost $3.2 billion was generated via a pricing differential ranging from roughly 3% to 5%.
According to a local newspaper, the court decided that merchants were required to register in order to engage in trading between domestic and international exchanges. The registration requirement is difficult to enforce.
The traders essentially cashed in on the disparity in pricing between cryptocurrency exchanges in South Korea and those outside.
South Korean exchanges have a reputation for pricing cryptocurrencies higher. The reason for this is the scarcity of high-return investment possibilities in the nation. The Kimchi Premium describes this occurrence, whereas the Kimchi Discount describes a price drop.
South Korea’s cryptocurrency earnings reached a record high of $4.2 billion in 2021, matching the historic increase of Bitcoin to about $65,000 on worldwide markets. Statista predicts that by 2027, the country’s cryptocurrency earnings will have reached $2.2 billion.
Also, the court procedures looked at how careful the bank personnel were. There was a pricing differential between the two exchange sites, and 16 people reaped substantial profits from it.
“It seems that most of the time, bank workers just went ahead and executed the transfer transactions without checking whether the foreign currency transfer applications were legitimate.”
There was insufficient evidence to show any infringement of the law, the court concluded, notwithstanding the prosecution’s appeal. So, it won’t be a breach of Supreme Court precedents even if the verdict is not guilty.
Regulators in South Korea have not yet provided clear guidance. If BeInCrypto’s February 7 news is to be believed, South Korea will not implement the Virtual Asset Protection Act until July 2024.